“U.S. retail sales increased less than expected in June
as receipts at automobiles dealerships surprisingly fell, but details of
Tuesday's report suggested the economy was on a solid footing at the end of the
second quarter. The Commerce Department said retail sales rose 0.2 percent last
month after an upwardly revised 0.5 percent advance in May.” Story at…
http://www.reuters.com/article/2014/07/15/us-usa-economy-retail-idUSKBN0FK1EQ20140715FED: SOME VALUATIONS ARE STRETCHED (CNBC)
“Fed Chair Janet Yellen gave a tepid thumbs-up to the
economic recovery while expressing disappointment in housing and pledging to
remain vigilant over asset bubbles, in congressional testimony she delivered
Tuesday…a separate Federal Reserve report indicated concern over asset prices. "Valuation
metrics in some sectors do appear substantially stretched—particularly those
for smaller firms in the social media and biotechnology industries…” Story at…
http://www.cnbc.com/id/101836922
HUSSMAN: LONG TERM STOCK MARKET PROSPECTS ARE DISMAL
(Hussman Funds)
“Ockham’s razor is a principle that states that among
various hypotheses that might be used to explain a set of observations, the
hypothesis – consistent with the evidence – that relies on the smallest number
of assumptions is generally preferred…When we observe the increasingly tortured
arguments that “this time is different,” we see investors discarding
straightforward explanations that are fully consistent with the evidence…I have
no particular expectation that the present market cycle won’t be like the
2000-2002 instance…” – John Hussman, PhD, Weekly Market Commentary at…http://www.hussmanfunds.com/wmc/wmc140714.htm
MARKET REPORT
Tuesday, the S&P 500 was down
about 0.2% to 1973 (rounded).
VIX rose about 1% to 11.96.The yield on the 10-year Treasury Note was up slightly to 2.55% at the close.
The Bond Ghouls
still aren’t happy. Troubles around the
world are also sending buyers to the US and driving interest rates down.
CORRECTION WATCH – CLUES BOTH WAYS
No Correction: The Percentage of Stocks above their
200-dMA was 63% Monday (data is a day late); 61% is the trouble point for that
stat. The S&P 500 is 7.3% above the
200-dMA and 10% above the 200-day is the trouble point for that one. Sentiment was
77%-bulls and this indicator will switch to negative at 83%. RSI (SMA/14-day) declined to a neutral 62.
{70 is overbought}.
Correction Now: Statistically, the index is too “quiet”
(as it has been since mid-May) and a pullback is suggested anytime. Chart wise,
the index has moved up to near (or at) the top of the 3-month chart upper trend
line Monday and that could mean the Index is ready for pullback mode. The
Market Internals on the NYSE returned to negative Monday and remained negative
today. They'll need to turn around soon if a pullback is to be avoided.
The Fed’s valuation comments today may be enough to get
the ball rolling on a pullback, but I can’t tell because my targets weren’t met
on technicals. News may trump the technicals – we’ll see.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks
advancing (NYSE) fell to 47% at the close Tuesday. (A number below 50% for the 10-day average is
generally BAD news for the market.) New-highs outpaced New-lows Tuesday. The spread (new-highs minus new-lows) was +73.
(It was +154 Monday.) The 10-day moving average of change in the spread fell to
minus-17. In other words, over the last 10-days, on
average, the spread has DECREASED by 17 each day. The smoothed 10-dMA of up-volume
was DOWN today and the Internals remained negative on the market.
Market Internals are a decent trend-following analysis of
current market action, but should not be used alone for short term trading.
They are usually right, but they are often late. They are most useful when they diverge from
the Index. In 2013, using these
internals alone would have made a 16% return vs. 30% for the S&P 500 (in on
Positive out on Negative – no shorting).
Of course, few trend-following systems will do well in an extreme
low-volatility, straight-up year like 2013.
NTSM
The NTSM analytical model for LONG-TERM MONEY remained
HOLD Tuesday. Sentiment slipped to 77%-bulls
(5-dMA of {bulls/(bulls+bears)} for funds invested in selected Rydex/Guggenheim
funds at the close on Friday (data is a day late). (83% is the negative level
for the Sentiment indicator.) This value was 85%-bulls on 19 May. Price is
positive because up moves have been higher than down moves. Sentiment, Volume & VIX indicators are
all neutral.
MY INVESTED POSITION
I increased my stock allocation to 50% invested in stocks
on 26 March because of the NTSM indicators turned positive 24 Mar at the
close. 50% in stocks is fully invested
for me, given my age (semi-retired) and the risk inherent in today’s stock
market. I am watching closely to see if it is time to reduce my long-term stock
holdings.
--INDIVIDUAL STOCKS--ENSCO (ESV): HOLD (Earnings announce 31 July)
For my initial discussion see the NTSM blog at:
http://navigatethestockmarket.blogspot.com/2014/05/coppock-curve-says-stock-crash-nowblow.html
Ensco has surpassed the mean and median analyst price targets so I rate it hold. There are numerous positive reports though, and with a PE of around 6, downside is limited.
